AT&T's Acquisition Of Time Warner Could Be In Jeopardy

I litigate entertainment, intellectual property, and business disputes.

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The U.S. Justice Department is reportedly considering a lawsuit to block AT&T’s acquisition of Time Warner, which was announced slightly over a year ago on October 22, 2016. At a stated price of $85.4 billion, the Time Warner acquisition would be among the largest media deals in history. The two companies have extended the transaction’s termination date in order to give the Justice Department more time to approve the deal.

The primary objection to the acquisition is that it would allow the combined AT&T-Time Warner company to control both the creation and the distribution of media and entertainment content. The deal would put TimeWarner’s content—CNN, HBO, Warner Bros., the Turner networks, etc.—under the same corporate umbrella as AT&T’s content delivery services—AT&T’s “pipes,” including Internet services, DirecTV and wireless services. Advocacy groups such as the American Cable Association, which represents smaller cable operators, worry that if combined, the companies could monopolize the communications and entertainment marketplaces. An AT&T-Time Warner company, some groups warn, could give preferential treatment to its own entertainment and media content over rival content, or even refuse to sell its own content to other providers.

The Justice Department has been in ongoing talks with AT&T to approve the merger under a settlement that would require the new company to abide by certain conditions. The DOJ’s threat to sue to block the deal entirely may represent a stall in negotiations, and it may be an effort to persuade AT&T to agree to the DOJ’s settlement conditions. Possible conditions could include requirements that Time Warner’s content remain readily available to other telecom companies, or that AT&T’s content delivery services would not discriminate against Time Warner’s media company competitors.

The Justice Department's antitrust division head Makan Delrahim supports limited federal intervention in marketplaces and has gone on record saying “antitrust employs law enforcement principles to maximize economic liberty subject to minimal government imposition." But while still a presidential nominee, Donald Trump claimed that AT&T’s proposed acquisition of Time Warner put “too much concentration of power in the hands of too few,” and he pledged to block the deal if he was elected president.

In an attempt to alleviate any concerns, AT&T announced that it would establish a new media group that would be completely separate from its wireless, broadband and television operations. Analysts have predicted mixed implications for consumers. While a combined AT&T-Time Warner could offer a new type of video content and create a new rival to cable television, it could also bring the risk of higher prices and exclusive content.

AT&T went on record today saying "When the DOJ reviews any transaction, it is common and expected for both sides to prepare for all possible scenarios. For over 40 years, vertical mergers like this one have always been approved because they benefit consumers without removing any competitors from the market. While we won't comment on our discussions with DOJ, we see no reason in the law or the facts why this transaction should be an exception.”

We will find out shortly whether the DOJ wants to put a wrench in this mega-deal.

Zachary T. Elsea, attorney at Kinsella Weitzman Iser Kump & Aldisert, represents companies and individuals in a wide variety of entertainment, intellectual property, and business disputes, including copyright and trademark matters, trade secret litigation, state and federal appeals, and other commercial disputes.